1. Copyright. 1997, Dr. T. K. Hira, Professor ISU 1 Financial Attitudes, Beliefs & Behaviors Of College Students

2. Copyright. 1997, Dr. T. K. Hira, Professor ISU 2 Our personal financial situations u Are often better reflections of who we are internally than of who we seem to be on the outside u Our money behavior reflects our self-worth which was shaped by our childhood

3. Copyright. 1997, Dr. T. K. Hira, Professor ISU 3 What causes excessive behaviors? u No single factor is sufficiently powerful enough to explain excessive behaviors u Multidimensional factors influence excessive behavior: –psychological, –social, –cultural, –environmental: »economic, market, credit.

4. Copyright. 1997, Dr. T. K. Hira, Professor ISU 4 u Debt vs. credit u Credit Use –Purpose: production/consumption –attitudes: decades of instant gratification u Credit Industry –numerous products - credit cards –technology –high risk lending Credit Environment: past & present

5. Copyright. 1997, Dr. T. K. Hira, Professor ISU 5 Need for research u there has been little research on when and how one acquires knowledge of money and the economic system in general or the degree to which family influence carries over into consumption activities as adults (Abramovitch, et al., 1991).

6. Copyright. 1997, Dr. T. K. Hira, Professor ISU 6 Previous studies u Credit use and payment practices u Trends and amounts of student loans u Financial socialization in the family u Personal finance knowledge

7. Copyright. 1997, Dr. T. K. Hira, Professor ISU 7 Objectives.. to understand.. u Childhood experiences with money u Sources of influence on their financial behavior u Current spending patterns, u Use of credit: credit cards, student loans and other consumer debt, u Ability to handle debt repayment responsibility in the future u Feelings about current debt u Need for more information

8. Copyright. 1997, Dr. T. K. Hira, Professor ISU 8 Samples and Data collection u Random sample - in Spring ‘97 –2000 selected –665 completed the questionnaire –a response rate of 34 percent u Convenient sample -Fall ‘96) –442 seniors –During student loan exit interview

9. Copyright. 1997, Dr. T. K. Hira, Professor ISU 9 Limitations of the study u Some information was based on memory of past experiences & their effects, u Difficult separating effects of one specific influence from others, u Cross-sectional sample does not allow to assess change within a person, u Sample drawn from one midwestern state u Response rate

10. Copyright. 1997, Dr. T. K. Hira, Professor ISU 10 Average student - random sample (N=665) u Median age22 years u Gender (female)51% u Never married82% u Ethnicity (white)85% u Student status –Freshmen21% –Sophomore17% –Juniors 23% –Seniors 38%

11. Copyright. 1997, Dr. T. K. Hira, Professor ISU 11 Average student...random sample u Employed (PT)61% u Current month. income$893 u Average T. Debt $12,353 u Av. Income after Grad.$28,813

12. Copyright. 1997, Dr. T. K. Hira, Professor ISU 12 Two Aspects of Money Behavior u (1) The "planner" –part that thinks carefully and plans rationally, –knows rational decision making strategies, –recognizes the importance of postponement of of gratification, –exercises self control.

13. Copyright. 1997, Dr. T. K. Hira, Professor ISU 13 Two Aspects of Money Behavior u (2) The "doer" –part that acts impulsively, –cannot implement behavior decided upon through cool, dispassionate reflection, –interferes with rational decision making by seeking immediate gratification. »(Thaler and Shefrin,1981).

14. Copyright. 1997, Dr. T. K. Hira, Professor ISU 14 Money personalities u Spender22% u Worrier22% u Planner37% u Other20%

15. Copyright. 1997, Dr. T. K. Hira, Professor ISU 15 According to students themselves.. u “Most college students are obsessed with material possessions, image, and living “high on the hog”. u They do this by taking the maximum loans possible with no regard for paying them back. Govt. loans need to be greatly reduced to prevent rapid spending by students and bankruptcy after college. u Over half of the people I know will have over $30,000 in debt upon graduation.”

16. Copyright. 1997, Dr. T. K. Hira, Professor ISU 16 Spending behavior of college students u Buy things don’t need56% u Shop to celebrate44% u Buy without plan33% u Can’t resist sales27% u Buy what can’t afford16% u Hide spending habits15% u Debt creates problem11%

17. Copyright. 1997, Dr. T. K. Hira, Professor ISU 17 Compulsive buying behavior Lisa says... “Shopping fills an emptiness in my soul”

18. Copyright. 1997, Dr. T. K. Hira, Professor ISU 18 Gambling behavior u Proportion involved in gambling 33% u Frequency of gambling (yr.) 6 u Favorite gambling activity –slots11% –sports12% –black jack/video poker 4% –power ball 3% u Mean $ spent each time$32

19. Copyright. 1997, Dr. T. K. Hira, Professor ISU 19 Sources of influence on consumer behavior u Socialization agents have been classified into four categories on the basis of formality of the agent and learner type: –formal agents: family or school –informal agents: mass media or peers (Ward, 1973; Ward, 1974; Talmon, 1963).

20. Copyright. 1997, Dr. T. K. Hira, Professor ISU 20 Your financial behavior u Do you know your money personality? u Who had the most influence on your money habits –Mom? Dad? Others? u What are your strong and weak points when it comes to handling money? u What steps have you taken to assure your financial security? u What role does money play in your relationships to others? –friends--parents--siblings --spouse u How easy is it for you to talk to others about your money concerns? u What is your most important money concern for the: – present and – the future?

21. Copyright. 1997, Dr. T. K. Hira, Professor ISU 21 Who influence their money beliefs & behaviors u Father66% u Mother64% u Friends/peers23% u Grandparents –Grandfather13% –Grandmother 9% u Religious teachings 9% u Media –Books/mag.8% –TV/radio8% u Schools 7%

22. Copyright. 1997, Dr. T. K. Hira, Professor ISU 22 The Influence of Family on Money behavior u persists well into adulthood. u and it appears to become part of the developing individual's personality –(Chaffee et al., 1971).

23. Copyright. 1997, Dr. T. K. Hira, Professor ISU 23 u Allowences - 10 -11 yrs.43% u Check Acts. - 15 -17 yrs46% u Credit card - 18 yrs & older 70% u Personal loans -18 yrs & older 43% u Particip. in FF discus.15 -17 yrs37% u Knew FFsituation 12 -17 yrs59% u Earned income - 15 -17 yrs40% u Saved money - 9 - 11 yrs 51% Involvement in financial activities during childhood

24. Copyright. 1997, Dr. T. K. Hira, Professor ISU 24 Borrowing behavior of college students u Av. number of credit cards 3 –45%1 or 2 –13% 3 cards –16% 4 and more u Av. credit card debt$1,027 u Av. student loan$5,814 u Av. other loans$8,96 u Debt at graduation$12,352 u Av. expected income $28,813

25. Copyright. 1997, Dr. T. K. Hira, Professor ISU 25 Feelings about finances.. dissatisfied/VDis u Amount owed45% u Current financial situation48% u Money mgt.. skills35% u Often worry about finances21% u Ability to meet emergencies43%

26. Copyright. 1997, Dr. T. K. Hira, Professor ISU 26 Students’ beliefs about their debts... “..Students believe that all their debts will be paid as soon as they get their first job. This is a major misconception. Credit cards are the problem. Most of my friends have $2,000-$4,000 credit card debts, plus $10,000-$15,000 school loans!”

27. Copyright. 1997, Dr. T. K. Hira, Professor ISU 27 Factors related to total debt u Personality type u Family communication u Involvement in financial tasks u Spending behavior u Satisf. w/ money mgt. skills u Presence of worries about finances u Satisfaction with financial situation

28. Copyright. 1997, Dr. T. K. Hira, Professor ISU 28 Graduating seniors - exit interviews (N= 442) Mean amount u Total debt $14,498 u Expected payment $211 u Expected income$27,653

29. Copyright. 1997, Dr. T. K. Hira, Professor ISU 29 What are students saying... “Student loans are my biggest anxiety. I will graduate in May and do not look forward to all those student loans....”

30. Copyright. 1997, Dr. T. K. Hira, Professor ISU 30 Types and amounts of student loans Loan type % Mean$DK$ u Subsidized 59 11,14230% u Unsubsidized 36 6,35316% u Plus 11 3,944 4% u Other* 16 2,800 3% u Total debt 70 14,498 Pell Grant, Perkins, Stafford, financial institutions, charitable/religious org.

31. Copyright. 1997, Dr. T. K. Hira, Professor ISU 31 Student Loans by college

32. Copyright. 1997, Dr. T. K. Hira, Professor ISU 32 Reasons to borrow.... u to be able to attend college 42% u to replace parental support29% u to support a life style51% u Loans and employment status –would have to work w/o loans (94%) –worked with loans(93%)

33. Copyright. 1997, Dr. T. K. Hira, Professor ISU 33 Ability to attend college among those with.. u Subsidized loans 12% u Unsubsidized loans6% u Other loans 2%

34. Copyright. 1997, Dr. T. K. Hira, Professor ISU 34 Feelings about student loans u Wished had borrowed less58% u Wished had borrowed more 8% u Satisfied w/ amount borrowed39%

35. Copyright. 1997, Dr. T. K. Hira, Professor ISU 35 Concerns about repayment u Great concern15% u Some concern40% u No concern 45%

36. Copyright. 1997, Dr. T. K. Hira, Professor ISU 36 Students need information/education u “It is unfortunate that there are not many known resources that students can turn to for financial help”. u “We need to take at least one class on financial survival and company benefits/insurance”.

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39. Copyright. 1997, Dr. T. K. Hira, Professor ISU 39 Students debt...according to students.. u “My debt is coming from shopping and not because I have to pay for my own education. u Therefore, my theory is I will be able to pay it all off after graduation. u As of right now, I am not currently in “debt” because I always pay at least the minimum amount due. u Most kids will be deeper in debt from college loans.”

40. Copyright. 1997, Dr. T. K. Hira, Professor ISU 40 Customers’ ability to function u The constantly changing financial environment requires an educated consumer. u In technically advance and changing financial services industry whether the consumer will function well or not depends on –whether or not the consumer has skills necessary to understand the options, make appropriate selections among available alternatives, and understand his/her responsibility of the selected option

41. Copyright. 1997, Dr. T. K. Hira, Professor ISU 41 Who is responsible to educate consumers..young and adult u Financial institutions –all lenders: educational and non educational u Commercial institutions u Employers u Borrowers –themselves and their children u Educators –schools and colleges –adult and continuing education

42. Copyright. 1997, Dr. T. K. Hira, Professor ISU 42 for giving me the opportunity to be with you THANKS